Dropbox Co-Founder Drew Houston Builds His War Chest

Dropbox

In an effort to strengthen his company’s capacity and build its war chest, Dropbox co-founder Drew Houston is raising between $250 million to $600 million round of funding at a $10 billion valuation. Dropbox, the file hosting service company Houston co-founded together with Arash Ferdowsi in 2007 is taking advantage of the easy fundraising market. This was possible because of the good performance of the company as well as the profit-potential of its newer products. Much of the funding will go to hastening the release of the company’s business software. With a $10 billion valuation, Dropbox is one of those highly valued tech companies supported by venture capitalists. This also effectively made Houston the newest billionaire in town.

Dropbox is now starting to target companies who want to manage how their employees share and store files using its service. Right now, there are four million businesses using Dropbox and this could be tapped and maximized by offering a new product focused primarily on the company’s data security needs. For 2013, its total customer base is estimated to be 200 million.

In 2011, Dropbox raised $250 million with funds coming from Goldman Sachs, Sequoia Capital, Accel Partners and Index Ventures. With the judicious use of these funds, the Dropbox’s sales increased year-on-year from 2011’s revenue base of $46 million to 2012’s $116 million and now for 2013, the sales is expected to reach more than $200 million.

Houston believes this growth momentum of the company can only be sustained with another round of funding. However, Houston said in reference to the suggestion that the company take the Initial Public Offering (IPO) route to get fresh funding as what Facebook did in 2012 and Twitter’s IPO last year, “I think it’s something I’m sure we’ll do eventually, but for now, it’s really nice to just really focus on recruiting, really building a great foundation, really building the next generation of great products that we’re excited about.”

With the funding it is expected to receive from investors like BlackRock Inc. as well as from venture capitalists who backed Dropbox in earlier funding, the company could now focus in attracting more of the best talents in the industry. In 2012, it poached Kim Malone Scott who did excellent sales jobs at Apple and for Google at its AdSense, DoubleClick and YouTube units. Kevin Egan, a key sales personnel at Salesforce for 10 years likewise joined Dropbox in 2012. And just recently, Henri Moissinac, former Facebook director of mobile partnership and Tom Hsieh of Spotify were also lured to join Dropbox. With a deep talent base not only those involved in technology development but also those in sales, Dropbox can really focus in convincing its corporate clients to try its latest product offerings.

Last November 2013, Houston launched the new Dropbox For Business. The features of this newest product are: personal and professional files can be accessed using a single account, enhanced permission controls, a monitor to check what files are being accessed by each employee, prevention of unauthorized file sharing and deleting or transferring files if the employee leaves the company.

According to TechCrunch’s Josh Constine, Dropbox needs to beat Box Inc. which is targeting the same client-base. Box Inc. is a similar online file sharing and cloud content service yet mainly offered for businesses. Compared to Dropbox, Box Inc. has only about 200,000 clients however the company has a reputation for good security features. Among the many high profile clients it snagged are Procter and Gamble, LinkedIn and MTV, added Constine.

More companies are now in need of a dependable and efficient cloud storage, sharing and syncing system to complement their growing operations. According to Constine, Dropbox co-founder Drew Houston is in the right position to compete and build his war chest to take advantage of this opportunity in the enterprise storage industry.

By Roberto I. Belda

Sources:

TechCrunch

The Wall Street Journal

Forbes

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